The decision will make it easier for local residents to recover damages from national firms, consumer groups say.
Smokers in Maine have won their bid to force the tobacco company Altria Group to stand trial for allegedly defrauding them into believing that "low tar" and "light" cigarettes were a healthier alternative to regular cigarettes.
The ruling is an important victory for injured consumers and consumer advocate groups who say it will make it easier for local residents to recover damages from national companies involved in alleged deceptive practices.
The decision is a setback for business groups that have been urging the high court to expand the application of preemption principles to help short-circuit state-based consumer lawsuits.
The case stems from a lawsuit filed against Philip Morris USA and its parent company, Altria, charging that the companies engaged in a decades-long fraud on Maine smokers in violation of a state law against deceptive business practices.
Altria responded to the suit by arguing that its products are regulated by federal law and the FTC, not the state of Maine. A federal judge agreed and dismissed the smokers' suit. But the First US Circuit Court of Appeals in Boston reinstated the action, ruling that the state lawsuit is not preempted by federal law.
At the heart of the case was a clash between a state law, the Maine Unfair Trade Practices Act, and a federal law, the Federal Cigarette Labeling and Advertising Act.
Lawyers for Altria argued that the federal labeling act preempted the Maine law. The federal labeling act says in part that if cigarette packages are labeled in conformity with the act, "no requirements or prohibition based on smoking and health shall be imposed under state law" on advertisements or promotion of cigarettes.